It is my belief that the automotive market has currently...

It is my belief that the automotive market has currently expencing and will continue to experience massive change over the next few years. The shift from ICE's to EV is an enourmous one and something that I don't believe would be approporately priced into certain equities given by the market.

Covid has brought on an extremely tight supply of new vehicles, further exacerbated by the shortage of semiconducter chips which has sent the cost of both new and second-hand vehicles through the roof. It has affected automotive related stocks with different exposures in varying manners;

BAP/GUD - Benfitted from a total lack of new automotive supply, rising age of second-hand vehicle use.
APE - Lower volume but evidently higher margin on the limited supply of new vehicle's and servicing of such.
ARB - Benefitted from fiscal stimulus, lack of overseas travel + other covid-related short-term impacts
+ others which I haven't discussed here.

Circling back to my original point, the structural change will see a continuation of tight supply of automotives for the next few years. Perhaps not as tight as we have seen over the past few years but we won't see a flooding of the market as we have seen in the past.

(For example, Ford are cutting workers in their ICE division)

Turning attention to the OEM's themselves - They don't appear to be incentivsied to increase supply. In fact they appear to be running at a much greater profitability given the tight supply.




Coming full-circle to APE - I am yet to conclude on exactly what the outcomes of structural change would be for Eagers. I would doubt they can replicate the margins they experienced in 2021. The stock appears to be priced at an undemanding level and possibly leaves upside if structural change in the automotive market can lead to sustainability higher profitability over the next few years.